Tag: Scarcity

“Welcome to the Hyper-Meritocracy,” Cowen writes in his latest book Average Is Over.

This is an important book. Cowen is his typical thought-provoking self, showing us a possible (and probable, in my opinion) future where the skills needed to succeed will differ from those today.

Welcome to a world of extremes. On one hand, many people are “seeing the erosion of their economic futures.” On the other hand, “the very top earners, who often have advanced postsecondary degrees, are earning much more.”

This is how the book got its title: Average is Over.

This maxim will apply to the quality of your job, to your earnings, to where you live, to your education and to the education of your children, and maybe even to your most intimate relationships. Marriages, families, businesses, countries, cities, and regions all will see a greater split in material outcomes; namely, they will either rise to the top in terms of quality or make do with unimpressive results.

Cowen believes that workers will increasingly fall into two categories.

The key questions will be: Are you good at working with intelligent machines or not? Are your skills a complement to the skills of the computer, or is the computer doing better without you? Worst of all, are you competing against the computer? Are computers helping people in China and India compete against you?

If you and your skills are a complement to the computer , your wage and labor market prospects are likely to be cheery . If your skills do not complement the computer, you may want to address that mismatch. Ever more people are starting to fall on one side of the divide or the other.

Welcome to the age of machine intelligence.

It’s becoming increasingly clear that mechanized intelligence can solve a rapidly expanding repertoire of problems. Solutions began appearing on the margins of the world’s interests . Deep Blue, an IBM computer, defeated the then– world champion Garry Kasparov in a chess match in 1997. Watson, a computer program, beat Ken Jennings— the human champion— on Jeopardy! in 2010, surpassing most expectations as to how quickly this would happen.

…

We’re close to the point where the available knowledge at the hands of the individual, for questions that can be posed clearly and articulately, is not so far from the knowledge of the entire world. Whether it is through Siri, Google, or Wikipedia, there is now almost always a way to ask and— more importantly— a way to receive the answer in relatively digestible form.

It must be emphasized that every time you use Google you are relying on machine intelligence. Every time Facebook recommends a new friend for you or sends an ad your way. Every time you use GPS to find your way to a party.

…

Date-matching algorithms are steering our love lives and replacing the matchmaker. Match.com recently improved its services, and as of summer 2011 more than half of the emails sent on the service originate from recommended matches, rather than from unaided individual choices. Better algorithms often are seen as the future of the sector, whether or not they really find the best person for us. Arguably the machine recommendations are a way of tricking the user into making a plausible date choice rather than cruising more profiles and postponing a decision; that possibility illustrates our willingness to defer to the machines, even when they aren’t necessarily better at the task at hand.

Think we're ages away from machines doing amazing things? Do you remember the New York Times Story that illustrated how Target, through algorithms, knew a teenage girl was pregnant before her father.

In an age of machine intelligence, where will most of the benefits go?

To put the question in the bluntest possible way, let’s say that machine intelligence helps us make a lot more things more cheaply, as indeed it is doing. Where will most of the benefits go? In accord with economic reasoning, they will go to that which is scarce.

In today’s global economy here is what is scarce:

1. Quality land and natural resources
2. Intellectual property, or good ideas about what should be produced.
3. Quality labor with unique skills

Here is what is not scarce these days:

1. Unskilled labor, as more countries join the global economy
2. Money in the bank or held in government securities, which you can think of as simple capital, not attached to any special ownership rights (we know there is a lot of it because it has been earning zero or negative real rates of return)

As machines become more powerful, the people who benefit will be the people who are “adept at working with computers and with related devices for communications and information processing.” The way to earn well will be to augment the value of tech, even if only by a small bit.

That means humans with strong math and analytic skills, humans who are comfortable working with computers because they understand their operation, and humans who intuitively grasp how computers can be used for marketing and for other non-techie tasks. It's not just about programming skills; it is also often about developing the hardware connected with software, understanding what kind of internet ads connect with their human viewers, or understanding what shape and color makes an iPhone attractive in a given market. Computer nerds will indeed do well, but not everyone will have to become a computer nerd.

The key to the future is the ability to “mix technical knowledge with solving real world problems.”

There is a chapter in Cowen's book called “The Freestyle future.” Rather than type out lengthy excerpts from the book, Cowen explains the concept briefly in this interview:

Russ: So let's talk about what you've learned as a chess fan. And you write at some length. At first I was rather taken aback by this, but I grew to find it quite fascinating. You write at some length about the role of machines in chess tournaments, and particularly in freestyle. Talk about that and why it's a nice potential template for future human interaction.

Cowen: Freestyle is a form of chess where a human teams up with a computer. So, if you play human-and-computer against computer, for the most part human-and-computer, if it's a practiced human, will beat the computer. Even though computers per se are much stronger than humans at chess, it's the team that's stronger than either one. And I think this is a good metaphor for a lot of what our job market future will look like. So there's a big chunk of the book that looks rather closely at freestyle chess and tries to see what we can learn from it.

Russ: The thing I found most provocative about that is that the best freestyle teams do not necessarily have the best human players. In fact that could be something of a handicap.

Cowen: That's right. The really good human players are too tempted to override the computer and substitute in their own judgment. The best freestyle teams, they are quite epistemically modest, the human or humans involved. And what they are really good at is asking questions. So they'll run two or three different computer programs and then just check on where do those programs disagree. And then they'll probe more on those points. And that's what the humans do well that the computers, at least not yet, aren't able to copy. So it's knowing what questions to ask that has become the important human skill in this freestyle endeavor.

Russ: So, applying that to the medical diagnosis example you gave earlier, it suggests I don't want the guy or the woman who had the best grades in medical school or the most arrogant–which is often in today's world, can be, the best doctor. I might want the most modest doctor, or not the most modest, but someone who is willing to let the diagnosis provided by the machine be the “right” one.

Cowen: That's right. So, wisdom and modesty will become much greater epistemic virtues in the future scheme. I think that's overall a good thing. We should revere those qualities more. And we will have to, looking forward.

We have to ask questions. And we have to be “meta-rational,” to borrow a term from decision theory. “That is,” Cowen writes, “I must realize that in most situations the judgment of (Shredder, the computer chess program) is simply better than my own, and defer accordingly. I am most likely to succeed in overriding the judgement of Shredder in complex strategic positions, in some endgames, when the program is fooling around with questionable opening choices, and when the program is getting greedy for material. … I can't out-calculate the machine unless it boils down to the machine's shorter time horizon, and I don't always know if the length of the time horizon is the key issue.”

Most of us don't want to listen to the machines. We think we're smarter and we don't know enough to know where we are smarter and where we're not. Without knowing we operate outside of our circle of competence. So as much as anything the future will mean knowing our limits and wanting/being willing to listen to machines. This goes against the entire “go with your gut” industry.

So I think as humans we’re somewhat programmed to be a bit rebellious and to not want to be controlled, which is perfectly understandable given that others are trying to control us as often as they are. But that’s going to mean in those new settings, which we’ve never biologically evolved to handle, we’re going to screw up an awful lot.

What are the broader lessons we can take away?

1. Human-computer teams are the best teams.
2. The person working the smart machine doesn’t have to be an expert in the task at hand.
3. Below some critical level of skill, adding a man to the machine will make the team less effective than the machine working alone.
4. Knowing one’s limits is more important than it used to be.

If we merge Cowen's thoughts in Average is Over with How Children Succeed and the concept of Grit, we come to the conclusion that in a world of information, what will be scarce is the ability to sit down in a quiet room and apply yourself. “Information isn’t what’s scarce; it’s the willingness to do something with it,” Cowen argues. But maybe we're getting lazy.

So if you’re an individual, say from China or India, and you’re really smart and motivated, you’re going to do much better in this new world than say 10 or 20 years ago.

But there are a lot of people in the wealthier countries, I wouldn’t describe them as lazy, but they’re not super motivated. They think they can more or less get by. I think in relative terms those people are already starting to see lower wages because they’re just not quite the prize commodities they think they are. They’ll do okay. They’ll be able to get jobs, but they’re not really individuals who are going to see a lot of income growth, and I think this could be a rude awakening to a lot of people.

I think there will be a lot of so-called soft humanities roots that could have potentially big payoffs for hard, smart workers. It’s not all about how we all become programmers, and a lot of that kind of work can be outsourced or given to smart machines anyway.

So I would just stress to people that the value of really beginning to understand how other people think, to the extent you can acquire that in education, if that’s what you love, if that’s what you’re good at, that’s great. Not everyone has to jump on the computer science bandwagon. Though, of course, many people should.

Average is Over will help you navigate the future of work and position yourself accordingly.

“The biggest mistake we make about scarcity is we view it as a physical phenomenon. It’s not.”

We're busier than ever. The typical inbox is perpetually swelling with messages awaiting attention. Meetings need to be rescheduled because something came up. Our relationships suffer. We don't spend as much time as we should with those who mean something to us. We have little time for new people; potential friends eventually get the hint and stop proposing ideas for things to do together. Falling behind turns into a vicious cycle.

Does this sound anything like your life?

You have something in common with people who fall behind on their bills, argue Harvard economist Sendhil Mullainathan and Princeton psychologist Eldar Shafir in their book Scarcity: Why Having Too Little Means So Much. The resemblance, they write, is clear.

Missed deadlines are a lot like over-due bills. Double-booked meetings (committing time you do not have) are a lot like bounced checks (spending money you do not have). The busier you are, the greater the need to say no. The more indebted you are, the greater the need to not buy. Plans to escape sound reasonable but prove hard to implement. They require constant vigilance—about what to buy or what to agree to do. When vigilance flags—the slightest temptation in time or in money—you sink deeper.

Some people end up sinking further into debt. Others with more commitments. The resemblance is striking.

We normally think of time management and money management as distinct problems. The consequences of failing are different: bad time management leads to embarrassment or poor job performance; bad money management leads to fees or eviction. The cultural contexts are different: falling behind and missing a deadline means one thing to a busy professional; falling behind and missing a debt payment means something else to an urban low-wage worker.

What's common between these situations? Scarcity. “By scarcity,” they write, “we mean having less than you feel you need.”

And what happens when we feel a sense of scarcity? To show us Mullainathan and Shafir bring us back to the past. Near the end of World War II, the Allies realized they would need to feed a lot of Europeans on the edge of starvation. The question wasn't where to get the food but, rather, something more technical. What is the best way to start feeding them? Should you begin with normal meals or small quantities that gradually increase? Researchers at the University of Minnesota undertook an experiment with healthy male volunteers in a controlled environment “where their calories were reduced until they were subsisting on just enough food so as not to permanently harm themselves.” The most surprising findings were psychological. The men became completely focused on food in unexpected ways:

Obsessions developed around cookbooks and menus from local restaurants. Some men could spend hours comparing the prices of fruits and vegetables from one newspaper to the next. Some planned now to go into agriculture. They dreamed of new careers as restaurant owners…. When they went to the movies, only the scenes with food held their interest.

“Scarcity captures the mind,” Mullainathan and Shafir write. Starving people have food on their mind to the point of irrationality. But we all act this way when we experience scarcity. “The mind,” they write, “orients automatically, powerfully, toward unfulfilled needs.”

Scarcity is like oxygen. When you don't need it, you don't notice it. When you do need it, however, it's all you notice.

For the hungry, that need is food. For the busy it might be a project that needs to be finished. For the cash-strapped it might be this month's rent payment; for the lonely, a lack of companionship. Scarcity is more than just the displeasure of having very little. It changes how we think. It imposes itself on our minds.

And when scarcity is taking up your mental cycles and putting your attention on what you lack, you can't attend to other things. How, for instance, can you learn?

(There was) a school in New Haven that was located next to a noisy railroad line. To measure the impact of this noise on academic performance, two researchers noted that only one side of the school faced the tracks, so the students in classrooms on that side were particularly exposed to the noise but were otherwise similar to their fellow students. They found a striking difference between the two sides of the school. Sixth graders on the train side were a full year behind their counterparts on the quieter side. Further evidence came when the city, prompted by this study, installed noise pads. The researchers found this erased the difference: now students on both sides of the building performed at the same level.

We are all susceptible to “the planning fallacy,” which means that we're too optimistic about how long it will take to complete a project. Busy people, however, are more vulnerable to this fallacy. Because they are focused on everything they must currently do, they are “more distracted and overwhelmed—a surefire way to misplan.” “The underlying problem,” writes Cass Sunstein in his review for the New York Review of Books, “is that when people tunnel, they focus on their immediate problem; ‘knowing you will be hungry next month does not capture your attention the same way that being hungry today does.' A behavioral consequence of scarcity is “juggling,” which prevents long-term planning.”

When we have abundance we don't have as much depletion. Wealthy people can weather a shock without turning their lives upside-down. The mental energy needed to prevail may be substantial but it will not create a feeling of scarcity.

Imagine a day at work where your calendar is sprinkled with a few meetings and your to-do list is manageable. You spend the unscheduled time by lingering at lunch or at a meeting or calling a colleague to catch up. Now, imagine another day at work where your calendar is chock-full of meetings. What little free time you have must be sunk into a project that is overdue. In both cases time was physically scarce. You had the same number of hours at work and you had more than enough activities to fill them. Yet in one case you were acutely aware of scarcity, of the finiteness of time; in the other it was a distant reality, if you felt it at all. The feeling of scarcity is distinct from its physical reality.

Mullainathan and Shafir sum up their argument:

In a way, our argument in this book is quite simple. Scarcity captures our attention, and this provides a narrow benefit: we do a better job of managing pressing needs. But more broadly, it costs us: we neglect other concerns, and we become less effective in the rest of life. This argument not only helps explain how scarcity shapes our behaviors; it also produces some surprising results and sheds new light on how we might go about managing our scarcity.

Tom Stafford discusses a lot of the psychological principles that make rational bidding hard. Auctions also hit on many psychological persuasion techniques:

First, auctions use the principle of scarcity, whereby we overvalue things that we think might run out. Auction items are scarce in that they are unique (only one person can have it), and scarce in time (after the bids are finished, you’ve lost your chance). Think how many shop sales successfully rely on scarcity heuristics such as “Last day of sale!”, or “Only 2 left in stock!”, and you’ll get a feel for how powerful this persuasion principle can be.

The other principle used by auctions is that of “social proof”. We all tend to take the lead from other people; if everybody does something, or says something, most of us join in before we think about what we really should do. Auctions put you in intimate contact with other people who are all providing social proof that the sale item is important and valuable.

“It is not enough to succeed. Others must fail.” — Gore Vidal

the competitive element of auctions is crucial to provoking our irrational buying behaviour. Once we’re involved in an auction we’re not just paying to own the sale item, we’re paying to beat other people who are bidding and prevent them from having it.

Still curious? The best book you can read on the subject of psychological influence is still Robert Cialdini’s Influence.

In response to But Wait … There's More, a kind reader passed along a link to a wonderful interview between Andrew Warner and Tim Hawthorne (a producer of infomercials).

On how to orchestrate an immediate response:

..In order to do that, I think there are definitely certain products that fall into a category of generating immediate response. That’s why we say in direct response television that product is king. It would be difficult for us to sell, for example, an automobile with one click. Where by having someone call an 800 number, if you can get somebody to call a 800 number or to click for more information about a considered purchase, like an automobile, a washer/dryer, something of that sort. In order to get somebody to respond immediately, it has to fall into some categories that we would consider to be appropriate for immediate response. That’s why we say product is king. These particular categories tend to fall, in direct response television, I think there’s some similarities on the Internet, into categories such as fitness, beauty, diet, business opportunities, kitchen and home appliances, and things of this sort which are easily demonstrable and within a price range where an immediate response is very possible. Priced anywhere from $9.95 to let’s say $495. This is the price category and these are the product categories that seem to appeal mostly to people to make that immediate response, which is what we’re looking for in direct marketing.

Along with that, you’re looking at products that do appeal to certain key parts of needs of human beings. Among those are a need for love, a need for security, a need for acquisition or wealth, a need for pleasure. We can also take a look at products and see how they might be in terms of appealing to solving fears that people have or satisfying greed which is again acquisition or wealth. Also, products that somehow tap into guilt or exclusivity, the one-of-a-kind type of thing and those that build ego. When it comes to a product, people in direct response television, they can take a look at a product. They can see if it’s simple, if it solves a common problem, if it appeals to one of these very instrumental aspects of human nature. If it doesn’t, then it’s not going to be something that we would recommend anybody try in direct response television, and it’s probably not going to work on the Internet either.

Creating urgency

…Well, I think the first and foremost way to do it is to really define what we call “the big promise.” The big promise is, essentially, one line that you’re going to be putting out as your headline, somewhere, if it’s a video, somewhere within the first 5 to 60 seconds, as to what your product ultimately can do for an individual. The big promise and how it’s crafted is probably the most important thing you need to do creatively in putting together your commercial or your ad.

I’ll give you an example. We did a product for a client a number of years ago, which was a patterned, multi or dual roller, painting device. It was alike a roller paint device except it had a pattern and there were two different rollers on a stem so that you could actually create these patterns on a wall like faux painting, as they called it. It was called Wall Magic. What we determined was that this particular product was going to be excellent for people that really wanted to have a different look on their walls other than a flat painted wall and people that found it dreary and drudgery to paint any wall. We came up with what we thought was a big promise that would be effective. Here’s the big promise. Transform anyone’s home or apartment from ordinary to extraordinary in just minutes. What we tried to do here was to move beyond just the fact that you can paint something that’s pretty on your walls quickly and create a line that was going to appeal to people and their dreams of creating a home that’s much more beautiful than they’ve ever had in the past. They aren’t going to have spend a lot time and sweat about it. Transform anyone’s home or apartment from ordinary to extraordinary in just minutes. The big promise. That could be a headline. That could be a subject line of an e-mail. The big promise in crafting exactly what your product can do, the ultimate benefit that provides, is probably the most important thing in terms of creating an urgency to buy.

On talent

…I think that after the product, and if you’re doing a television commercial, after the product, the talent becomes actually the next most important factor of success. By talent, I’m talking about the presenter or the celebrity. You really don’t have that equivalence, I think, certainly in display advertising or any kind of text advertising on the Internet. In video, talent becomes really critical to the success, and we can talk a little bit more about that later.

On generating an immediate reponse:

…Creating an irresistible offer comes down to actually understanding some of the basic needs of an individual. Among those needs are, is that everybody wants a deal. Everybody wants to get something with dollars off. Everybody wants to get it quickly. Everybody likes to get more and more. These are some of the basic aspects of human nature. So, we try to appeal to individuals by structuring an offer that’s actually going to hone in on these aspects. Among those aspects is we’re going to be trying to add bonuses and premiums and discounts and coupons. Let me give you some examples of successful direct response television offers and many of these you’ve seen. You’ve seen not only in direct response but in print advertisings. In print advertisements, you have seen them on the Internet.

Here’s some of the basics. Buy one get one free, or get the second one at half price. So you’re getting an immediate discount. Buy one and get a second one super size, so you’re actually doubling or tripling the order. Buy one and the second is actually going to be double the size. Drop a payment. Let’s say that your offer is three payments of $19.95, that’s your initial offer. But wait, if you call now, if you order now, we’ll actually make one payment for you. So it’s only two payments of $19.95. So that’s drop a payment.

The $9.95 trial offer is something that’s worked very well for people in direct response for the last 10 or 15 years. That is for a product that’s going to be much more expensive than $9.95. Maybe $49.95, $99.95, $199.95, but you can try it now for only $9.95 or for the cost of shipping and handling. In that particular case, vendors obviously taking a risk. You’re only collecting $9.95, and you’re shipping the product to the individual. They are essentially required to return the product to you within 30 days or you will hit their credit card for the full price. Of course, they understand this when they call in or when they actually go to the website and actually affect the order. They understand that if they don’t return the product within 30 days they’ll be paying the full amount or they’ll be paying multiple payments after that 30 days. But a $9.95 trial offer, what a superb way to get people to just try your product for less than $10.

…Dollars off, you can say that it’s $99.95, but for the next 30 days 30% off or $30 off. Discounting immediately becomes very powerful too. Those are some examples of how to create an irresistible offer. One note that I should make here is that if you’re doing something in video and the process that you’re taking people through is linear in time, you actually build the offer over a period of one, two, three minutes. You provide the initial offer. Perhaps it’s $99.95 and you’re going to get A, B, and C. A minute later you say but if you call now we’re also going to give you premiums D and E. Oh, by the way, if you use your credit card, we’re also going to give you free shipping and at the very end, we’re also going to give you a free gift, which if you return the product, the gift is yours to keep. Just our saying thanks for you trying the product. You can see that over the period of two to three minutes we can actually build this offer with a number of different levels, providing the core offer with the high price, then additional bonuses, then potentially reducing the price instead of three pay of $33.33, it’s now going to be two pay of $33.33. Adding more bonuses, giving free shipping. So going through a process of actually building what we call a Christmas tree offer. By adding more and more that a person’s going to get makes it very enticing and irresistible, I think, as you can see

On the magical transformation

I’ll give you kind of a classic example of what we mean by magical transformation, and that’s in a diet show. Everybody’s familiar with, Nutrisystem, I guess. It could be long form or it could be short form. The before and after is somebody before they lost the weight and after they lost the weight. You will always see those images side by side eventually. It might be a full screen image, initially of the person before they lost the weight, squeeze it back, bring up the image of the person after they’ve lost the weight. They’ve lost 30 pounds. They’ve lost 50, 60 pounds. That’s a before and that’s an after. That’s what we call the magical transformation. Magical transformation is in essence how to showcase what your product can do for somebody. In other words, how is your product going to transform my life? Of course, if it’s a diet product, it’s going to transform me magically from being an overweight person to being a fit person. If it’s an exercise product, it’s is going to be the same way.

…Virtually in every infomercial, every direct response commercial you see, you look for the magical transformation and how it’s executed because it’s probably, it’s the thing that grabs people the most emotionally. How is the product going to transform my life?

For example, going back to vacuum cleaners which are very basic, it’s throwing a lot of stuff on the floor. You have a dirty floor, take your vacuum, one swipe across the floor and everything is cleaned up. Where that vacuum swiped, everything else is still dirty.

Magical Phrases

… One of the ways to do that is to first be aware of some of the words that are very powerful in direct marketing. I’ll give you a list of some of these. As I mentioned, “free” is still, I think, and will always be considered the most powerful word in selling. After that we would probably think of words such as now, you or your, easy, easily, guarantee, break-through, revolutionary, fast, quick, instant, magic, new, special, exclusive, limited time, risk free, only, save, money back, money back guarantee, call now, and in terms of a classic phrase, “but wait, there’s more.

Everybody kinds of kicks around that particular phrase and it’s used often. One of the reasons it’s used so often is that it’s so effective. … So here are some additional phrases. “This offer couldn’t possibly get better, or could it?” “But hold on, we’re not done yet.” “We know you’ll love.” “Call or log on now.” “You’re going to love this.” “And that’s not all.” “Call right now and you’ll also receive an additional free bonus.” “But hold on, I’m just getting warmed up.” “What could you possibly be waiting for?” Let’s see what else I can find here. “This is an unbeatable price.” “You don’t want to miss out on this one.” “What are you waiting for?” “This is an absolutely incredible deal, and you won’t find it anywhere else.” “If you aren’t completely satisfied, just return it for a complete refund. No questions asked.” Which is a classic phrase in direct response television, asking no questions is really critical. You don’t want to confront somebody when they’re returning something.

The real classic, I think, also is, “If you don’t like it, we’ll buy it back.”

The hard sell

The fact is, is that if you want to sell directly and you want to sell immediately, the hard sell always works best. There is no doubt in any direct marketer’s mind. As much as we would love to be selling soft, because nobody likes to be sold the hard sell which is telling people what you’re going to get, telling them what the product is going to do for you and telling it to them directly, there’s nothing that’s going to make the phone ring or people click and order more than the hard sell.

Is there anything else that you think is important?

I think that there are a lot of different things that are necessary, I think, to understand about great selling. There are some books which I probably would recommend …Books that people should buy to understand the basics of strong direct marketing and how to really sell on the Internet or on television.

Robert Cialdini calls But Wait…There's More “A wholly fascinating account of a wholly fascinating industry.” If you're interested in how late night TV infomercials use every psychology trick in the book, you need to read this.

Infomercials are powerful. A thirty-second commercial for Tide doesn't ask you to do anything. The goal is for you to think about Tide and to associate it with something happy and clean so you'll pick it up the next time you need washing detergent.

An infomercial, however, requires you take immediate action. One moment you're sitting on the couch eating potato chips, the next you've decided there is really nothing you'd rather have than an ab-machine. How does that happen?

Everything about an infomercial is tested — Whether it's the price, the number of freebies, the background music, or even the color of the model's hair — with the sole goal of selling more product. Nothing is left to chance.

Along the way infomercial marketers have picked up an amazing amount of knowledge about how we behave as shoppers and what motivates us to make a purchase.

What can you learn from Ron Popeil, the master infomercial seller?

All the time-tested strategies were on display: he offered bonuses or freebies as incentives, and heightened tensions by warning people that he only had a certain number of units on hand (“supplies are limited!”). He assigned numbers to his customers—”You’re number eight, you’re number nine,” and so on—which gave them the impression that you had to get in line to take advantage of the great deal he was offering up. He employed the classic countdown technique, where he systematically lowered the price as he neared the end of the pitch. and when he was at the very end and started accepting cash, he avoided selling the item to the last batch of eager customers, instead launching into a fresh pitch. To get new people to come over and watch a demonstration, it requires that other people be standing in rapt attention. “Wait, there’s something else i want to show you before you take this home with you,” he might say.

Why does that steak knife cut through a shoe?

Perceived value also comes into play when a demonstrator slices a knife through an old shoe or cement block or uses a pair of shears to cut through a penny. Why would you need your steak knife to cut through a hammer, you ask? You wouldn't. But in addition to proving to you that the knife is indestructible, it's raising the perceived value of the product. Somewhere in the recesses of your subconscious, your brain is telling you that if for whatever reason you wanted to cut through a boot, you can rest assured that you have the knife that's up to the task.

On marketing late at night

One of the early discoveries of infomercials was that they perform better when they were marketed late at night. “Airtime was cheaper, too,” but “viewers defenses started to topple as they grew sleepy.” Boredom also played a role. “When he placed sixty-second commercials during a hit show, the responses were unimpressive. When the programming was lousy, many more people purchased products.”

Reciprocation

“He threw in giveaway after giveaway. He suggested that he would only offer the Dehydrator at such a reasonable price point to people who promised to “tell a friend” about the incredible offer—a classic tactic designed to make the audience feel indebted to him for his act of generosity, which, naturally, they could reciprocate by making a purchase.”

What do infomercials sell?

…What all of these half-hour infomercials have in common, of course, is that they all offer some sort of cure. Late-night pitches aren't in the business of offering us dresses, trash cans, CD players,or cans of roach spray. They're in the business of presenting serious problems—and providing us with quick, easy, painless solutions. That blender isn't just designed to make smoothies. It's going to save you precious minutes everyday and give you more time with your loved ones. Don't you want to be a decent human being and spend more time with your family?

There's a good reason products advertised on infomercials are tied to our emotional well-being, our self-image, and our relationships with others. It gives us a powerful reason to pick up the phone and place an order.

Sex

One of the biggest problems with long-form shows is getting people to stop their channel changing long enough to tune in … A half-hour show requires you to bypass that episode of Cops, rerun of Seinfeld, … and actively watch someone try to sell you something you probably don't need. That's why many infomercials have some sort of hook, something that momentarily distracts views and gets them to move their finger off the up/down dial on their remote control.

Sex usually works. What buying real estate has to do with women with big boobs is unclear, but moneymaking products have long features cleavage-bearing babes.

Repetition

Research has demonstrated that subtle repetition is highly effective. In fact, studies have shown that because infomercials expose viewers to the sales message for an extended period of time and do not repeat the same message but go back and rehash the same material while making small changes to the script, the repetition is actually much more powerful.

On manufacturing pricing complexity

Infomercials thrive on complicating purchasing decisions for consumers by bundling items with free offers, bonuses, and rewards. A “but wait, there's more!” suddenly muddles our perceptions and makes it harder to judge the offer that's just been presented to us.

What about shipping and handling?

Cleverly, shipping and handling costs are often concealed from viewers until they call. … by the time you learn the amount, you've already made the mental decision to buy the toaster oven, you called the 800 number, and you've just spent five minutes on the phone placing your order. Are you going to hang up because the shipping was a few $ more than you anticipated?

What's the deal with the host?

What's most important is that the host communicates authority. It doesn't have to be real authority, mind you. Just as TV doctors are used to pitch health-related products, it's merely the perception of authority that matters most. Clothes matter. … A host with an accent isn't accidental: Americans perceive English accents as more authoritative … Once you find a host for a show, the time-tested formula often requires the presence of a lackey, someone to play off against the pitchman. This is yet another form of social proof.

Wording matters

And every word counts: Greg Renker pointed out that his infomercials always say “when you call,” not “if you call.” The nuance matters. It suggests the viewer will call—it's merely a matter of time. … Ever hear the line “if the lines are busy, please call back?” … the mere suggestion of a rush of callers sends people scurrying to the phone.

When you think about it, every element of an infomercial is designed to manipulate you into taking action.

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